Hurricane Energy Share Discussion Threads

[pro_s2009] 04/3/2021 07:15

I believe the contract break with Bluewater is up for potential activation around June 2021. Most likely it will be triggered in my view.

Not many months to go now before that potentially happens.

[steve73] 04/3/2021 02:25

For a sandstone reservoir once water has broken through it tends to keep flowing even if they reduce the drawdown because water has a much lower viscosity than the oil (so flows preferentially). I'm not sure if it would behave the same in FB... flow in the larger fractures will be dominated by density (i.e. oil is preferential as DD is reduced), whereas the smaller fractures will behave more like SS and be dominated by viscosity. But to maintain oil production rates at higher water cut, they need higher DD (or MORE suck), and this will increase the water rate from the fractures even faster... or they reduce the DD (less suck) to reduce the water ingress, but this will also give less oil.

In answer to preferentially shutting off the water in well 6... A simple plug wouldn't work as the oil production is (thought to be) from the SS at the toe. They would need to use a "straddle pack" to isolate the fracture where the water is coming in (which would need a PLT to confirm the positions), and there's no guarantee that it won't simply move into the next fracture along once the "easiest path" is blocked of. You could end up chasing your tail and needing to block off very long sections, but it wouldn't be apparent at the outset. Also, running a PLT with the ESP removed would not be fully representative.

And obviously you'd need to shut in the well (the only producer) for possibly a significant period to do this. It's not going to be possible... at least not yet.. perhaps after 7 has been sidetracked, unless 6 has totally watered out by then.

[ngms27] 04/3/2021 00:21

Sorry but I'm not interested in data from two years ago.What's happened in the last six months?Seems consistent to my eyes.

[thegreatgeraldo] 03/3/2021 18:34

& the current plan is to move to relying on a sidetracked 7z & well 6. Quite what state well 6 will be in by the middle of next year & what impact the new well will have on its productive capacity is one for the reservoir whizzes......can't see a well above well 6 doing anything but reducing its productivity though.....

[fat frank] 03/3/2021 18:22

TGG: I think it is fair to say that being reliant on a single well is far from ideal....

[thegreatgeraldo] 03/3/2021 18:12

Fat Frank
3 Mar '21 - 17:53 - 24116 of 24116
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Simple question: A lot of comments on this board stating that this latest RNS shows that HUR is finished


...Not from me, but I have pointed out the obvious - that they're skating on very thin ice relying on well 6 until they sidetrack & successfully complete well 7z.

Some folk will paint a much rosier picture, something those impaled on the recent spike above 5p might regret having bought into....

[fat frank] 03/3/2021 17:53

Simple question: A lot of comments on this board stating that this latest RNS shows that HUR is finished and will just suck what they can out of the current well, to the benefit of the bondholders, and then shut up shop.

If that is the plan why don't they just say so? Why even bother alluding to drilling in 2022 or 2023?

It's not as if we haven't been warned about the possibility of a zero return for investors....

[ngms27] 03/3/2021 17:07

tgg, yes they can with a rig on site by using a plug to isolate to FB. However previous notes suggest that for all intents and purposes the sandstone and FB behave as a single reservoir as there's no seal. Therefore sandstones will still have the same pressure issue, same OWC etc.

Oh wait a minute, there's no rig until late Spring 2022 at the earliest...

[htrocka2] 03/3/2021 15:22

tournesol .........one minor argument with your 'kicking the can down the road' assessment.....if this is as bad as you predict, why the hell arn't the shorters shorting the sh*t out of this?...no one's increased ..yet is being promoted as a dead cert share to short.

[thegreatgeraldo] 03/3/2021 15:03

ghhghh
3 Mar '21 - 13:08 - 24107 of 24112
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I keep asking but no one has replied - how can we evaluate the watering out risk when we don't know the impact of the sandstones?

...HUR should provide guidance with the Finals in the next few weeks. All we know on your straw man question is that they can't turn off/isolate the FB section of well 6.

[ngms27] 03/3/2021 14:43

Porrohmahnn, you're looking at different data to me on the OGA web site.

Looks entirely consistent over the past 6 months at least to me.

Decembers figures were 12.23k oil with 23.46% water cut from the OGA, so averaged over the month

We know on January 14th this was now 12.1k and 25% water cut which is a point in time. We can infer that water cut is increasing and is likely to be north of 25% for January when the OGA release figures as it's exponential growth not linear.

[kooba] 03/3/2021 14:02

I think more might become apparent on this engagement business shortly , but I assure you at least one large independent institutional shareholder who was keen to engage in discussions to help progress maximising shareholder value has received no constructive response prior to yesterday's rns.. this in itself is very worrying. The company stated they were engaging with all stakeholders over 4 months ago but this has excluded one and likely all of their largest equity holders. This may well demonstrate their view of equity holders generally , if so it may be necessary to challenge proposals if/when they do materialise as shareholders deserve to be properly considered if there are significant assets being enhanced by the improved oil price as they say.

[tournesol] 03/3/2021 13:45

Kooba

Hi

Thanks for detail of abandonment costs.

You say "They have not talked to leading shareholders about such plans or any fundraise."

Why do you say that?

The language in the RNS says that Hur has engaged with "stakeholders" - by definition that can only mean some combination of bondholders and/or shareholders.

The RNS says that the stakeholder group "includes" a group of bondholders. That language clearly indicates that stakeholders with whom discussion has been undertaken are not exclusively bondholders and that it must therefore include others who are not bondholders - ie shareholders.

regards

T

[ghhghh] 03/3/2021 13:08

Reality is most likely a mix of both.

CB's can begin to see that HUR may be worth more to them dead than alive, hence being greedier and demanding more onerous terms from equity.

Equity may now also be looking at the high oil price and calculating that they may be in a better negotiating position later this year. Hopefully a lot more cash in the bank and, even more hopefully, well performance better than the bears are forecasting.

I keep asking but no one has replied - how can we evaluate the watering out risk when we don't know the impact of the sandstones?

In this respect, has anyone seen the latest Hannam Note? I assume they will now update their 2021 production forecast? Be very interesting to see this since I assume HUR will guide.

Finally we know that CA want a farm out. This opens the door?

[kooba] 03/3/2021 12:52

Some good points however on decommissioning provision has been coveredOct 2020Consequently, the Company has reverted to the arrangement in place prior to the decommissioning bond, whereby £16.8 million ($21.7 million) of cash security will be held in trust in order to continue meeting the obligation to provide post-tax security for the estimated cost of decommissioning the production wells, subsea infrastructure and related FPSO costs for the Lancaster Early Production System. Accordingly, $21.7 million of the Company's unrestricted cash has now been reclassified as restricted cash.Under surmisesThe company may well have been rebuffed by some bondholders on future work plans but defining them as an "Ad hoc " group questions the level of engagement and whether any have become insiders to company's position and plans? They have not talked to leading shareholders about such plans or any fundraise.The availability of a suitable rig and support vessels may well be more of an issue as well as the genuinely more complex nature of the plan.

[btvitexcoinvxcryptowhale] 03/3/2021 12:02

Phone BP And Shell headquarters UKAnd say this Hi it's Antony Maris from Hurricane Energy I'm returning a phone call I missed.See what the Admin girl saysWee tip there BT

[tournesol] 03/3/2021 11:57

My take on yesterday's RNS is as follows.


First - the background facts

Hur is clearly facing significant risk.

There is an obvious specific risk that production will reduce and/or water increase. And there is a more generalised risk that PoO might fall. If either risk materialises then revenue will diminish.

In any event, reserves are only enough to support production for a relatively short time. So if production is sustained then reserves are exhausted before year-end 2022.

Next year Hur needs to redeem the Convertible Bonds and whenever it ceases production it will have to cover abandonment costs and other termination costs. It also has to plug and abandon the well(s) which are outside Lancaster and the date for that is somewhat earlier.

So, with all of the above in mind, Hur management came up with a cunning plan to drill a sidetrack and also to do water injection. Those might or might not result in additional reserves being unlocked.

In any event the costs of implementing the cunning plan would reduce the funds available for bond redemption and termination/abandonment. That would increase the risk faced by both bond holders and shareholders.

Second - the things I deduce/surmise from yesterday

The first point I deduce from yesterday's RNS is that Hur management has approached bond holders and asked if they would support the cunning plan. They have obviously said no. If things (ie production and PoO) continue as they are, the bond holders will get paid. Why would they take unecessary risks with that?

The second point I surmise is that Hur has also approached large scale shareholders and asked if they would support a fund raise to cover the costs of the cunning plan, so that the co has a better chance of surviving beyond 2022. In discussing this proposition, Hur has had to admit that the plan is not a slam dunk. Rather it is a high risk venture - " more complex in nature" than previous wells -> most of which have proved unsuccessful.

The big shareholders have obviously said "no" - or at least "not in current circumstances"

Hur management are doing their best to cover their embarrassment at being stood up by describing the proposed well as "more complex" and hence needing more time.

What they seem to be saying is that they will now do their best to maintain production through to next year whilst keeping their fingers crossed for PoO to stay high. By next year they could have enough in the bank to guarantee the bond conversion and to fund part of the cunning plan - thereby improving the risk/reward balance and making a fund raise more feasible/attractive.

There are of course some difficulties with the idea of kicking the cunning plan down the road by a year. What to do about the lease on the AM? What to do about the lead time required for a drilling/WI programme? What to do about the "going concern" question at the year-end? If reserves are within 12 months of depletion, how exactly can they claim to be a "going concern"?

[thegreatgeraldo] 03/3/2021 11:37

There's no "conjecture" as you suggest (on post 23506) about the water cut increasing....HUR have stated that is what is happening..... remember, the OWC is much shallower than previously believed.

[ngms27] 03/3/2021 11:17

Porrohmahnn, absolutely preposterous to suggest the OGA data is incorrect as this is a regulatory requirement for HUR to produce.

The issue you have is the difference between how HUR stated production to Shareholders and how they are required to state it to the OGA.

i.e. HUR's December RNS doesn't fill in the gaps:
The 205/21a-6 well is currently producing at c.12,300 bopd on artificial lift with a c.23% water cut. In early November 2020, the Company decided to limit production to approximately 12,000 bopd for reservoir evaluation and management purposes and aims to maintain production around this level in the near-term.

i.e. on what date did they actually go from Natural Flow to ESP? No mention of the water cut pre ESP either since the October 19% statement.

You are plain wrong, both the OGA and RNS can be factually correct.